Samizdata quote of the day

In India we used to have a more socialistic economy. Everything was rationed. Sugar was rationed, kerosene was rationed, rice was rationed.

[What I can remember of] a remark made by one of the commentators on the Indian Premier League cricket match between the Chennai Super Kings and the Rajasthan Royals. It was prompted by Chennai’s apparent “rationing” of all-rounder Albie Morkel, who despite being restricted to a mere 6 balls, still managed to score 18 runs, thus saving the game, Chennai’s interest in the tournament and, by extension, civilisation itself.

The “Permit Raj” (the spider’s web of regulations and rationining) was PARTLY got rid of in India (some years ago) and economic growth resulted from this partial deregulation.

However, these gains are now under threat – by the introduction of unsustainable Welfare State schemes.

It is like watching Western history – accept over much shorter period of time.

In most Western countries industry and trade (although not farming – a very important point as farming was, by far, the most importand industry in most Western countries) was controlled by web of regulations.

Then, in the late 18th and 19th centuries, these regulations were repealed (for example this was done in the late 1700s by Grand Duke Leopold in the case of Tuscany – the same man also greatly reduced tax rates) – – partly because of the influence of classical writers, but also to imitate the economic success of Britian (in Britain, although NOT in Ireland, state control of industry and so on had long been nominal – as there was no professional civil service, local or national, to enforce the old Tudor statutes – one of the most important mistakes of the mid 19th century was to create such as state machine, in imitation of France and especially PRUSSIA).

This deregulation even extended to Prussia (Frederick the Great being dead) and serfdom (the only really important state regulation concerning farming) was abolished (starting in the 1700s and extending to Russia in 1861 – England and Wales did not have any serfs to free and, therefore, did not formally abolish serfdom as it had collapsed centuries before).

Europe boomed economically (although it should be remembered that, for example, the new Prussia was not really the same as the old Prussia – as it had been given the Rhineland, the most economically advanced area of Germany, at the end of the French wars).

And this economic boom (caused by deregulation – the end of serfdom, complusory guilds, licensing and so on….) created the modern world.

However, starting in the very late 19th century (in Prussia – under BISMARK) various small schemes were set up – to provide for health, and welfare (old age and so on). Education was also taken over – the statist experiment of Frederick the Great expanded and expanded, and spread all over Europe and around the world.

In the late 20th and early 21st centuries the economies of the West were undermined by the ever expanding “Welfare States” as well as by the credit bubble financial system (something I can NOT blame Frederick for – his fraud was more old fashioned, capturing the molds for Polish coins and minting a lot of underweight coins pretending to be full weight and purity Polish silver and gold coins).

The ever expanding Welfare States (and the credit bubble financial system) led to the economic collapse of the various Western countries – including the United States. This collapse became obvious in 2013.

India appears to be going through this historical process – but much more quickly.

Yes, Paul, it is fascinating to watch the emerging economies recapitulate our development from agrarian to industrial, but also painful to observe how many of our major errors they seem intent on copying as well.

As Prof. Meade has written quite a bit about recently, the blue or progressive social model has run its course, and is no longer capable of organizing the resources to fund its legacy of social programs and committments.

It is indeed unfortunate that so many of the people who were or are in charge of the political/economic structures in countries like India or China, and many more of the smaller countries also, were raised and trained to believe that the very system now faltering so badly in the mature economies was the model they should copy for their own nations.

In Latin America, there is a wave of nationalizations going on amid much local rejoicing, as if the mess that such ideas caused in the economies of previously centrally controlled countries had never happened.

It is among the most striking examples of “blank out” thinking I have ever seen, although the lunacy going on in the US isn’t far behind it.

As I have said in another context, it certainly appears as if we are approaching a period of major economic turmoil even deeper than these past few years, as the rising economies sail into the rocks of corruption, cronyism, and over-extension that have so damaged the developed economies over this last decade.

I can’t see who will be able to hold things together. The US and most of Europe are already bankrupt, both economically and morally, and cannot offer any successful example for anyone to follow.

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